Chapter 14, Problem 1MCQ

To determine

The question requires us to determine the true option for the price level in an economy.

Explanation of Solution

Inflation indicates an increase in the general prices of goods and services in a market. Lenders, savers, and individuals with fixed incomes are hurt by the inflation while borrowers gain from the inflation.

So, option “a” is correct about the price level in an economy.

The other options are incorrect because:

b) The price level can fall or rise based on the economy’s situation.

c) The process of slowing down the rate of inflation is termed disinflation in a market.

d) Recession is an economic situation when the production of goods and services falls, spending and investments fall, and unemployment rises in the economy.